A30 CATCHWORDS Trade Practices - appellant about to commence business under the name "Bridge Stockbrokers Limited" - respondents an established stockbroking firm known as "Bridges Son & Shepherd" and often referred to as "Bridges" - whether proposed use of the name "Bridge Stockbrokers Limited" is merely confusing or is misleading or deceptive conduct or conduct likely to mislead and deceive - application of the objective test a matter for the Court - form of aunjunction. Trade Practices Act 1974, s. 52. BRIDGE STOCKBROKERS LIMITED and GREGORY P. MOORE v. BRIDGES & ORS. and BRIDGES & ORS. v. BRIDGE STOCKBROKERS LIMITED and GREGORY P. MOORE No. G 275 of 1984 Smithers, Woodward & Lockhart JJ. 14 December 1984 Sydney IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) ) GENERAL DIVISION } No. G 275 of 1984 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: B E Judges Making Order: Smithers, Woodward Date of Order: 14 December 1984 Where Made: Svdney ORDER THE COURT ORDERS THAT: 1. 2. The appeal be dismissed. BRIDGE STOCKBROKERS LIMITED and GREGORY P. MOORE Appellants BRIDGES & ORS. Respondents BRIDGES & ORS. Cross Appellants BRIDGE STOCKBROKERS LIMITED and GREGORY P. MOORE Cross Respondents & Lockhart JJ. The appellants pay the respondents' costs of and incidental to the appeal. The cross-appeal be allowed. 4. The Order of the trial Judge that: "3, The First respondent by itself its servants and agents be restrained from selling, offering for sale, providing or advertising any of its services or otherwise carrving on its business under any name including the word "BRIDGE" without clearly distinguishing such business from the business carried on by, the Applicants under the name "BRIDGES SON & SHEPHERD."" be set aside and the following be substituted: "3, Unless and until the Court otherwise orders, the first respondent bv itself 1t servants and agents be restrained from using or carrying on business under any name or style having as its first word "Bridge" or "Bridges"; and liberty be reserved to Bradge Stockbrokers Limited and Gregory P. Moore to apply toa single Judge of this Court for any variation to this order." 5. That the appellants pay the respondents' costs of incidental to the cross-appeal. and IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NO. G 275 OF 1984 ) GENERAL DIVISTON ) BETWEEN BRIDGE STOCKBROKERS LIMITED AND GREGORY P. MOORE o (APPELLANTS ) AND: KITCHENER WILLIAM ALFRED BRIDGES, WILLIAM BARRY BRIDGES, MICHAEL HENRY SHEPHERD, FREDERICK JOHN BARTON, ALAN ROBERT URBAN (RESPONDENTS ) CORAM: Smithers, Woodward and Lockhart JJ. DATE: 14 December 1984 REASONS FOR JUDGMENT Smithers and Woodward JJ.: On 17 July 1984 Sheppard J. made an order restraining the appeliant company (the company) from carrying on business as a stockbroker in the name "Bridge Stockbrokers Limited". The order was made on the ground that in carrying on its business as a_ stockbroker under that name it engaged in conduct in trade and commerce which was misleading or deceptive or likely to mislead or deceive within the meaning of s.52 of the Trade Practices Act 1974 (the Act). 2. The relevant facts of the case are fully set out in his Honour's Reasons for Judgment, which are drawn upon in the Paragraphs which follow. The company and the respondents (the firm) both carry on business as stockbrokers in the City of Sydney. The firm carries on associated interstate activities and the company proposes to do the same. Members of the firm are members of the Sydney Stock Exchange. The firm has carried on business since 1976 and intends to continue such business indefinitely under the name "Bridges Son and Shepherd". The firm trades in that name on the Melbourne Stock Exchange and on the Brisbane Stock Exchange through an agent. It is and has been widely known in the stockbroking profession and beyond as a stockbroker of good reputation. Since advertising by stockbrokers has been permitted the firm has advertised itself in the financial press and magazines and has spent over $35,000 on promoting itself as a "Full Service Broker". Its intention is to continue so to advertise its business. It was in anticipation of deregulation that the firm decided to promote itself as one which offered thorough and extensive service to its clients going far beyond acting as broker in relation to transactions entered into by them. The firm adopted a policy of offering private investors a thorough and comprehensive service rather than acting simply as the agent of clients on the trading floor or endeavouring to attract business from large institutional investors. In evidence were various brochures, advertisements and newspaper and magazine articles about the firm. In its own material, that is, in its advertisements and brochures, the firm is invariably referred to as 'Bridges, Son and Shepherd". But in some of the newspaper articles the firm is referred to as "Bridges". Those references, however, are normally found in context where elsewhere in the articles there is a reference to the firm in its full name. It is well known as "Bridges" amongst stockbrokers and some of the larger investors in the community. The Stock Exchange issues badges to its member firms, many of whom are known and referred to in an abbreviated way. The firm's badge simply says "Bridges". The firm's booth on the trading floor of the Sydney Stock Exchange has for many years been marked "Bridges". His Honour accepted evidence of a number of stockbrokers and senior executives of institutional investors to the effect that the firm is widely known or referred to as "Bridges". This finding certainly relates to the practice existing in financial and broking sections of the business community of Sydney. One would think it probable that the same practice exists beyond Sydney although perhaps to a lesser extent. The appellant Gregory P. Moore has long experience in the business of stockbroking in NSW. He is a member of the Sydney Stock Exchange. In 1976 he retired from a stockbroking firm in which he was a partner to develop a business which was then carried on and is presently carried on internationally under the name "Bridge Data Company". That business did not operate in Australia until early in 1982. The business of Bridge Data Company is to provide investors in stock markets, option markets and commodity markets with "highly detailed, highly sophisticated and virtually instantaneous information on movements and influences in all such major markets throughout the world". The information is provided through computer links with computers operated by the firm in St. Louis, in the United States of America, Bures in Suffolk in the United Kingdom and in Sydney. The information is received by subscribers on terminals installed in their premises. The business was first established in the United States in 1976. Since then it has extended to Canada, the United Kingdom, and Europe, and more recently, to Australia. Offices are presently being established in Hong Kong and Johannesburg. "Bridge Data Company" was registered in Victoria as a business name on 31 May 1982. The owner of -the name is Bridge Data (Far East) Pty. Limited of which Mr. Moore is the managing director. The name was registered as a business name in New South Wales at about the same time. The business of the firm is the supply of information to approximately 2,000 terminals throughout the world. Mr. Moore said that he had for many years wished to establish in Australia a discount stockbroking business when the rules of the Australian Stock Exchange permitted that to be done. He stated in evidence that the key to his concept of operating successfully a discount stockbroking business is and has been, since 1976, a service for supplying to investors or 5. clients of the stockbroking business the most detailed and up-to-date information on the stock market, coupled with fast and efficient execution of transactions. He said that in his opinion, this could only be achieved by the use of a computer based system and it was partly to that end, in the long tern, that the Bridge Data Company has been developed. In December 1983 Mr. Moore began to organise the establishment of a stockbroking business which would charge a flat fee of $75 per transaction regardless of the amount of the consideration, would extend no credit and would give no advice to clients. He said that there was considerable discussion between Mr. Lough, the secretary of Bridge Data (Far East) Pty. Limited, and the New South Wales Corporate Affairs Commission about the acceptability of various names incorporating the word "Bridge". "Bridge Stockbrokers" was not Mr. Moore's first choice. He preferred "Bridge Trading" or "Bridge Securities". "Bridge Stockbrokers" was his third preference. But some doubt arose as to whether the names "Bridge Trading" and "Bridge Securities" were available. It was established that the word "Bridge" is used as part of the names of many businesses and companies carrying on business in Australia. On 16 April 1984 a shelf company, Lesiner Investments Limited, was acquired by Mr. Moore for the purpose of conducting his stockbroking business in Australia. The name of the company was changed to "Bridge Stockbrokers Limited" by resolution of the shareholders passed on 19 April 1984. The change of name was registered by the Corporate Affairs Commission in Queensland where the company was incorporated on 15 June 1984. It is intended that the company will operate on the Sydney and Melbourne Stock Exchanges amongst others. It was accepted by the learned judge that the probable clientele of the company and the firm may, ina general way, be divided into four categories: (a) Major institutional clients controlling funds for investment on stock exchanges ranging to hundreds of millions of dollars. The members of this category of client are generally actively engaged in investment on stock exchanges and closely monitor stock markets on a daily or weekly basis. (b) Small institutional clients controlling funds ranging to a few million dollars. The members of this category are also very familiar with stock markets and the stockbroking industry generally. {c) Major individual clients. The members of this category range from active traders involved in transactions approximately once a week to inactive traders who engage in a few transactions per year. The members of this category are generally well informed about stock markets and the stockbroking industry generally. {d) Smaller individual clients comprising both active and inactive traders engaging in transactions ranging from approximately $1,000.00 to $5,000.00." It was suggested by the company that in none of these categories were the paths of the company and the firm likely to meet. There was evidence before the learned judge that the company seeks to attract business from a different section of the market from that in which the firm operates or is likely to operate. It was contended that the company's flat fee, exclusion of credit and refusal to proffer advice would differentiate its clients from those of a full service broker. It is apparent that in the total spectrum there will be persons who are quite well aware of the separate identities of the company and the firm and the class of business of each and who will choose between the one or the other according to the class of service required by them. His Honour said that the company would, at least initially, act mainly for investors in large transactions, and the firm mainly for personal clients engaged in transactions which are not so large. However it was found by the learned judge that both the company and the firm are seeking and will seek to offer their services over the whole spectrum of the market. And in the great body of potential clients of the company and the firm there will be persons who are acquainted with one or the other with varying degrees of awareness of their names and activities, and many who do not know either. A critical question as indicated in the joint judgment of Deane J. and Fitzgerald J. in Taco Co. of Australia Inc. v. Taco Bell Pty. Ltd. hereafter mentioned, is whether in using the name "Bridge Stockbrokers Limited" the company makes a misrepresentation. There is involved in this conduct, we believe, a representation that on the Australian stockbroking scene, the company is the only stockbroker known as "Bridge". But there is a question whether, in the circumstances of the stockbroking profession and of the business of buying and 8. selling of shares including the manner in which persons having an interest in buying or selling shares gain and exchange knowledge of the facts and ideas about that area of commerce and the personalities and characteristics of stockbrokers, there is a likelihood that the use of this name will be understood as an assertion or claim that the company is the broker known as "Bridges Son & Shepherd" or as "Bridges", or is its successor, or otherwise related to it. This was the matter before the learned Judge. He had before him passages of authority apposite to the problem before him. He referred to the observations of Stephen J. as he then was, in Hornsby Building Information Centre Pty. Ltd. v. Hornsby Building Information Centre Limited (1978) 140 CLR 216 at 277 - 278 that: "Thus, in passing off, a newly incorporated defendant company may not use, in its newly established business, its true corporate name if it be deceptively similar to that of a plaintiff with an established reputation (Fine Cotton Spillers and Doublers' Association Ltd. v. Harwood Cash & Co. Ltd. 19073 2 Ch. 184, at p.190). What has been said of passing off actions applies equally in the present case; as Buckley L.Jd. remarked in John Brinsmead & Sons Ltd. v. Brinsmead (1913) 30 RPC 493, at p.506, a statement which is literally true and accurate may nevertheless carry with it a false representation. Lord Morris expressed much the same notion in Parker-Knoll Ltd. v. Knoll International Ltd. £1962] RPC 265, at p.279. The same will apply in relation to s.52(1)." He referred also to the observations of Deane and Fitzgerald JJ. in Lego Australia Pty. Ltd. v. Paul's (Merchants) Pty. Limited (1982) 42 ALR 344, with reference to their observations in Taco Co. of Australia Inc. v. Taco Bell Pty. Ltd. (1982) 42 ALR 177:- " .. the question whether particular conduct of which complaint is made is misleading or deceptive or is likely to mislead or deceive is, in the ordinary case, a question of fact to be answered in the context of the evidence as to the alleged conduct and as to relevant surrounding facts and circumstances and that, irrespective of whether conduct produces or is likely to produce confusion or misconception, it cannot, for the purposes of s.52, be categorized as misleading or deceptive unless it contains or conveys in all the circumstances of the case, a misrepresentation. We went on to point out that the difficulty which will commonly arise in a s.52 case is in determining whether the conduct contains or conveys, in all the circumstances, a misrepresentation and in assessing the significance to that question of evidence that one or more persons were led into error". And the learned Judge referred to the observations of Stephen dg. in the Hornsby Case (supra) at p.228 to the effect that: "No doubt the meaning of the statutory prohibition which s.52(1}) enunciates must be gained from the terms of the sub-section itself; but nothing in those terms suggests that a statement made which is literally true, i.e. that the centre at Hornsby is conducted by Hornsby Building Information Centre Pty. Ltd. may not at the same time be misleading and deceptive. Tt clearly may be. To announce an opera as one in which a named and famous prima donna wil appear and then to produce an unknown young lady bearing by chance that name will clearly be to mislead and deceive. The announcement would be literally true but none the less deceptive, and this because it conveyed to others something more than the literal meaning which the words spelled out." His Honour also referred to the comments of the Full Court of the Federal Court in Global Sportsman Limited v. Mirror Newspapers Limited (19 June 1984, unreported) as follows: "A contravention of sub-~-s. 52(1) is established by 10. conduct which is misleading or deceptive or which is likely to mislead or deceive. Conduct is likely to mislead or deceive if that is a "real or not remote chance or possibility regardless of whether it is less or more than fifty per cent": cf£. Tillmans Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union (1979) 42 FLR 331, per Deane J. at p. 346; Sheen v. Fields Pty. Ltd. (1984) 58 ALJR 93. Evidence that an erroneous conclusion has been formed by reference to conduct is admissible to establish that the conduct was misleading or deceptive or likely to mislead or deceive; such evidence may be persuasive but it is not essential. Evidence of acts or omissions resulting from the erroneous belief may also be admissible but again is not essential. Sub-section 52(1) is concerned with the effect or likely effect of conduct upon the minds of those by reference to whom the question of whether the conduct is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself: Taco Company of Australia Inc. v. Taco Bell Pty. Ltd. (1982) 42 ALR 117 at p.202." It is apparent therefore that his Honour had in mind the considerations material in the application of the objective test as to whether the impending conduct of the company will contravene the provisions of s.52 of the Act, as to which he said "In the end the matter is one for the Court". In the light of those considerations his Honour posed the ultimate question "whether significant numbers of the public who in various capacities have occasion to deal with stockbrokers are likely to be misled or deceived, not merely confused by the Cappellant company's] conduct in using the "Bridge" name". He answered it in the affirmative. It is said that the evidence does not support this conclusion. 11. We believe it was and is inevitable that, over a wide area extending beyond professional circles, persons having a degree of business with the firm, or who discuss it in relation to their own affairs, have referred and will refer to it as "Bridges". It is the normal practice in modern conditions to identify entities by one word or some short abbreviation. The evidence before the learned judge of actual confusion was not compelling. No doubt this was partly because the company has not yet used its name in the context of actual stockbroking business, at least otherwise than in the course of broadcast interviews of Mr. Moore. The main evidence of confusion was that telephone calls had been received by the firm from persons who were seeking to approach the company. These calis occurred after the broadcast but before the company was listed in the telephone directory. It appears that the callers knew that they wished to speak to the company but having been unable to find its number in the telephone book they approached the firm thinking it might be involved. Certainly this does suggest the potential for confusion but in the circumstances was not compelling. If, when the company describes itself as "Bridge Stockbrokers Limited" it is to be regarded as saying no more than, "I ama stockbroker and my identity is established by the word "Bridge" " no misrepresentation is involved. It is quite clear that most members of the stockbroking profession know or will soon get to know the difference between Bridge Stockbrokers Ltd., and Bridges, Son & Shepherd or "Bridges", although confusion at the lower levels must be quite likely. 12. But it is a somewhat different question whether it is to be inferred that there is a material section of investors or potential investors who are likely to be misled by learning in one way or another that there is a stockbroking company carrying on business which calls itself "Bridge Stockbrokers Limited" or "Bridge Stockbrokers". If, in the circumstances,, the company may be understood as saying something more than "I am Bridge Stockbrokers and I offer you my services", toa material section of the public interested to some extent in share dealing, then that something must be that in the stockbroking world it is the entity known as "Bridges" or "Bridges Son & Shepherd" or the only entity with the name or known as, "Bridge" or "Bridges". Whether it is likely to be understood as saying either of these, is a question of fact. It is not to be determined by whether or not the company intended to make such a statement. It is a question of the meaning which various members of the public may be expected to put upon the use of the name in the circumstances in which the company's name and business may come to their knowledge. The relevant members of the public are investors and potential investors. They fall into numerous classes. There will be those who are potential investors but with no present intention of investing. There are those who are keen students of the corporate and share dealing scene who will be well aware of the firm and the company and will know that the company is not the firm. There will be those who have known of the firm for a considerable period and are acquainted with it in greater or lesser degrees. There will be those who have 13. recently heard of the firm, for the first time, from its publicity or in conversation with some acquaintance. There will be persons who receive advice from others which they believe refers to the firm whereas it actually relates to the company. It is certainly a tenable view that a proportion of persons having slight knowledge of the firm will draw the inference on learning subsequently of the existence of a stockbroker called "Bridge Stockbrokers Limited", that that entity is the "Bridges" they had previously heard about. The adoption of corporate form would cause no surprise. Of course literally the company has not said this, but when a statement or declaration is thrown into the public arena, where there is an existing environment and the likelihood of it being interpreted by persons with imperfect knowledge of all the relevant circumstances, a situation arises in which that statement may be interpreted as saying more than it literally does. And in this context the all embracing connotation in the name "Bridge Stockbrokers Limited" is important. In this connection the submission of the company is that the number of persons likely to be misied must be negligible and the error induced by its name could only occur in very special, unusual and infrequent circumstances. This submission can be examined in the light of contemplation of possible circumstances in which the error may be made. When the company puts its name before the public in brochures and advertisement the area into which it will reach must be large. In that area the situations in which the error may arise cannot in the nature of things be exhaustively stated or i¢. conceived. The error cannot live in any situation in which the knowledge of the person concerned as to the different identities of the company and the firm is adequate. It is where that knowledge is imperfect that the error may arise. A person, not of an analytical or trained business mind, believing that "Bridges Son and Shepherd" or "Bridges" are satisfactory brokers and having in mind to approach that firm in the near future could easily be diverted by learning of Bridge Stockbrokers Limited and approach it thinking he was approaching the firm or its successor. If such a person learned from some source of the restricted nature of the company's service, he might refrain from approaching it, believing that the company is the "Bridges" of whom he had heard, and seek out a broker not called "Bridge" or "Bridges". And of course if a person learning of the existence of Bridge Stockbrokers Limited, and mistaking it for the firm, were to approach that company and be informed of the company's terms of trade and find those terms unacceptable, he would be unlikely to be told there is a firm called "Bridges, Son & Shepherd" who are full service brokers. It would presumably be no part of the company's regular procedure to inform intending investors that there was such a firm with whom perhaps the caller had confused the company. One may consider also the impending investor who asks his friend if Bridges are satisfactory brokers. The friend, 15. knowing only of the company and not of the firm, may well answer, "Well, only if you are prepared to pay $75 no matter how small your transaction". The friend woulid hardly be put on alert by the use of the plural. . The chosen name for the company's business has about it a simplicity coupled with an element of comprehensiveness which give to it a special significance in an environment where there is already an operator well known as "Bridges". The dominant identifying word "Bridge" was very like the first and significant word in the name of the firm. The learned Judge said in one part of his judgment that, to his mind, it was not the word "Stockbrokers" which was particularly significant, but rather the word "Bridge". It is nevertheless of importance that the two words "Bridge" and "Stockbrokers" taken together produce a connotation of anall embracing mature. To the uninitiated, who had heard of Bridges, Son and Shepherd, and were potential customers of that firm, the news of the advent of a company with the all embracing name "Bridge Stockbrokers Limited" could well indicate that so far as stockbroking was concerned the company was the only entity carrying it out. If one chooses a name so close to that of an operator already in the business that confusion is probable, there will be a recurring need in normal business for care and discrimination. Where the name of that party is such as, in various circumstances, to carry additional overtones, then one is entering the area of misrepresentation. The overtones in 16. this name are that, in the stockbroking business, you will find "Bridge" or "Bridges" here and not elsewhere. To throw that into the public arena, where there are people with no duty or inclination to exercise a fine discrimination in the matter, nor any feeling of necessity for so doing, creates a likelihood of it being understood as saying what it seems to say. Such persons would be unlikely to expect that the company would claim to be the "Bridge" of the stockbroking world unless it was claiming also to be "Bridges". Although the learned judge was satisfied that the company chose its mame in good faith, it displayed no initiative in seeking a name which would give it the advantages of the use of the word "Bridge" and yet distinguish it from the firn. Mr. Moore said that he did not desire to incorporate the word "Data" into the company name because it would too closely associate the new company with Bridge Data Company. Yet in the company's own brochure its close association with Bridge Data Company is prominently featured. It is hard to accept that if reasonable effort had been made to find a suitable name distinguishing the company from "Bridges" it could not have been achieved. But instead of making that effort, Mr. Moore chose a simple but all-embracing name, almost inevitably productive of confusion. And it is inevitably in the area of the unskilled among the investing public that the overtones of the company's name are most likely to operate as a misrepresentation. His Honour was required to, and did, direct his mind to the assessment of the degree of probability that relevant persons might by reason of 17. the trading by the company in the name "Bridge Stockbrokers Limited" be led into error, and to the-numerical strength of that body of persons. It was his decision that significant numbers of the public who in various capacities have occasion to deal with stockbrokers are likely to be misled or deceived (not merely confused) by the company's conduct in using the "Bridge" name. In our opinion the learned Judge had before him circumstances from which the inference he drew might properly be drawn. In the course of his judgment, his Honour said that he had "given the matter a good deal of anxious consideration" and engaged in "a not insubstantial judgmental exercise". He stressed that, in the end, "The matter must be one of impression. It is a question of fact and degree". The case does seem to fall very close to the borderline between conduct which is misleading and deceptive within the meaning of the Act and conduct which is merely confusing. We have felt the same doubts which troubled his Honour but, at the end of the day, we find ourselves in agreement with the conclusion which he reached. In our opinion the appeal should he dismissed with costs. We also have before us a cross-appeal in which the firm alleges that paragraph 3 of his Honour's order in this matter 18. was expressed in inadequate terms and should be varied. The paragraph reads as follows:- "The First respondent by itself its servants and agents be restrained from selling, offering for sale, providing or advertising any of its services or otherwise carrying on its business under any name including the word "BRIDGE" without clearly distinguishing such business from the business carried on by the Applicants under the name "BRIDGES SON & SHEPHERD."" The order which the firm seeks is in the following terms :- "That the First Respondent by itself, its Directors, officers, servants and agents or otherwise howsoever be and it is hereby restrained from using or carrying on business under the name or style of "Bridge Stockbrokers Limited" or any colourable imitation thereof or any name or style having as its first word "Bridge" or any colourable imitation thereof." In our view the order as framed by his Honour is unsatisfactory because it would permit the company to use a name very like "Bridge Stockbrokers Limited" combined with a notice which could be understood by some as a reflection on the firm - because the company was apparently trying to distance itself from that firm. It was suggested at the close of argument in this appeal that the Court might give its decision on the appeal and, if the appeal was dismissed, ask the parties to produce short minutes of a possible form of order to satisfy the cross-appeal. 19. In our view it would be more convenient, and might save costs, 1f£ we were to make an order in terms which seem to us to be appropriate, while expressly reserving the right of the company and Mr. Moore, if it or he is so advised, to seek (preferably from the learned trial Judge) a variation of that order. This seems to be the most sensible way of covering all the possible permutations of names which the company may wish to adopt. We would uphold the cross-appeal with costs, set aside paragraph 3 of his Honour's order and substitute the following paraaqraph: "3. Unless and until the Court otherwise orders, the first respondent by itself its servants and agents be restrained from using or carrving on business under anv name or style having as its first word "Bridae" or "Bridges"; and liberty be reserved to Bridge Stockbrokers Limited and Gregory P. Moore to apply to a single Judge of this Court for any variation to this order." I certify that this and the nineteen (19) preceding pages are a true and accurate copy of the Reasons for Judament herein of The Hon Mr Justice Smithers and The Hon Mr Justice Woodward. Associate. {fy Dated: 14 December 1984 IN THE FEDERAL COURT OF AUSTRALIA ae No. G 275 of 1984 NEW SOUTH WALES DISTRICT REGISTRY www rw GENERAL DIVISTON ON_APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN : BRIDGE STOCKBROKERS LIMITED and GREGORY P. MOORE Appellants AND: BRIDGES & ORS. Respondents AND: BRIDGES & ORS. Cross Appellants AND: BRIDGE STOCKBROKERS LIMITED and GREGORY _P. MOORE Cross Respondents CORAM: Smithers, Woodward & Lockhart JJ. DATE: 14 December 1984 REASONS FOR JUDGMENT LOCKHART J. I have had the benefit of reading the reasons for judament of Smithers and Woodward Jd.. I need not mention the facts and the backaround to the appeal in any detail as thev appear fullv from their reasons. The Sydnev stockbroking firm known as Bridges, Son and Shepherd ("the firm") was formed in 1976 by Mr. Bridges Snr., his son and Mr. Shepherd. The firm recently opened an office in Melbourne. Mr. Bridges Snr. has been engaged in the stockbroking industrv for many years. The firm is known by its name "Bridges Son & Shepherd" and by the abbreviated name "Bridges". Many firms of stockbrokers, accountants. solicitors and other professional people are known by an abbreviation of their name, often the first name. This is a commonplace in Australia today. The second appellant, Mr. Moore, has been involved in the stockbrokinag industrv for manv vears. He retired froma firm of stockbrokers in 1976 and established a business in the United States of America that vear which carried on and still carries on business iunternationallv under the name "Bridge Data Company". The business of that firm has extended to Canada, the United Kingdom and Europe. In 1982 it commenced to operate in Australia. In April 1984 a shelf company was acquired for the purpose of conducting Mr. Moore's stockbrokina business in Australia and the name of the companv was changed to Bridge Stockbrokers Limited ("the company"). It has not yet commenced to carrv on business; but Mr. Moore intends that it will do so and operate on Australian stock exchanges including Sydney and Melbourne. The learned trial Judge found that there are substantial differences between the nature of the business conducted by the firm and the business which the companv proposes to conduct. His Honour found that the services which the company will offer will be limited to facilitatina the transfer of shares for a flat fee of $75 for each transaction. Advice will not be offered. If people wish advice they will be told to consult a conventional broker. The company will not permit trading on credit. In a transaction of purchase the company will either have to be placed in funds or have unconditional access to funds before it will act. In a transaction of sale it must have in its possession the share scrip and a sianed transfer. If a client is not prepared to deal with the company on that basis the company will not act. His Honour found that the business of the firm is the traditional one carried on bv stockbrokers in this country involving the receipt and execution of orders to deal in securities on the stock exchange and the furnishing of advice to clients. His Honour accepted in evidence that the clientele of the firm is qenerally divided into the following categories: (a) Major institutions controlling funds for investment on stock exchanges ranging to hundreds of millions of dollars; (b) Small institutions controlling funds ranging to a few million dollars: (ec) Major individual clients ranaing from active traders to inactive traders: and 4. (d) Smaller individual clients comprising both active and inactive traders engaging in transactions ranging from about $1,000 to $5,000. His Honour found that the emphasis in the firm's business is and will be upon private clients rather than upon institutions and that the personal relationship between stockbroker and client will continue. The proposed derequlation of activities of stock exchanges may cause the nature of the firm's business to undergo some change, especially as restrictions on advertising have now been removed. As a consequence it seems likely that prospective clients of the firm will come. not only from the recommendations of the firm's present clients. but also through advertising. His Honour also found that the company's business will cover as well the whole ranqe of investors and potential investors to which the firm has access, aithough the emphasis of the company's business is likely to be at least for the time being on institutional investors or those with large sums to invest who know exactly what they wish to buy or sell and do not need or seek the advice of a stockbroker. The appeal of the company derives from its willingness to operate for a flat fee of $75 no matter how larqe the transaction. Obviously those involved in larae transactions will have the most to gain by dealing with the company. His Honour's finding that the firm and the company will operate to a larae extent in different sections of the market. albeit with some degree of overlap, was challenged: but I am satisfied that there was ample evidence before his Honour to support that findind. His Honour found that although the names "Bridges, Son & Shepherd" and "Bridge Stockbrokers Limited" are apparentlv different when placed in iuxtaposition, people encountering one or other of them mav not find them so different. His Honour said that this applied. not onlv to members of the public lacking familiarity with the stockbroking industry, but also to those engaged in it. His Honour found further that derequlation is likely to cause substantial chance in the industry over the comina years with the introduction of all sorts of people into the industry who are presently only on its fringes or not familiar with it at all. His Honour said that, althouch the name "Bridge" 15 in common use as the commencina word in companv and business names in Australia, the use of the word "Bridde" along with the word "Stockbrokers" in the name of a company tradina on the stock exchange plainly distinquishes its field of operation from that of many other companies and businesses. His Honour concluded that the matter must be one of impression of fact and dearee and that the ultimate question was whether sianificant numbers of the public who in various capacities have occasion to deal with stockbrokers are likely to be misled or deceived by the respondent's conduct in using the name "Bridge". He concluded that the question should be answered un the affirmative. The relevant section of the public for present purposes consists of people who deal or who are likelv to deal with stockbrokers for the purpose of buying or selling securities. The question is whether they are likely to be misled or deceived by the 6. company's conduct in using the name "Bridge Stockbrokers". In mv opinion there are various categories of persons who are likely to be misled or deceived by the company's use of the name "Bridde Stockbrokers" or "Bridge Stockbrokers Limited". I do not propose to exhaust all the possible categories of persons but they seem to me to include at least the followindg:- (a) People who have dealt with the firm or who. for one reason or another - including introductions from others - know of the firm and who aet in touch with the companv by telephone or otherwise thinkinag that it is the firm and some of whom mav place orders with the company; (b) People who either know the firm or who have been recommended to it by others who know about it, and who seek advice alonag the lines traditionally given in this country by stockbrokers. They may qet in touch with the company by telephone or otherwise, thinking that it is the firm whereupon thev are told that advice is not qiven: thev then get in touch with a quite different firm of stockbrokers from the firm itself; (c) People who see an advertisement for Bridge Stockbrokers Limited and think that Bridaes Son & Shepherd have changed their name. They may ao toa third stockbroker to seek advice knowing from the advertisement that advice is not offered bv the company. This is sufficient to illustrate that there are various categories of persons in not insubstantial numbers who are likely to be misled or deceived by the conduct of the companv. In my opinion the trial Judge correctly concluded that the conduct of the respondent is likelv to mislead or deceive members of the public in contravention of s. 52. Although the respondent's case was based on passing off as well as s. 52 it was common ground before the trial Judge and before us on appeal that no separate questions arose peculiar to passing off so that the appeal could be disposed of on the basis of s. 52. There is one point, however, on which I respectfully differ from his Honour, and it 1s the subject of the cross appeal. His Honour ordered that the company be restrained in effect from carrying on its business under any name including the word "Bridge" without clearly distinauishing such business from the business carried on by the firm under the name "Bridges Son & Shepherd". His Honour appears to have had in mind the approach taken bv the High Court in Turner v. General Motors of Australia Ptv Limited (1929) 42 C.L.R. 352 where the relief aranted was an injunction restraining the defendant from using the words "General Motor" or "General Motors" without clearly distinguishing such business from the business carried on bv General Motors (Australia) Pty. Limited. The imposition upon a defendant of the requirement that it disclaim connection with the plaintiff or its business is not a course that has been generally followed in recent times. It may be appropriate in a case such as' the General Motors case where a small and recently established organisation was required to distinguish its business from that of a large international . organisation whose name was a household word. But where two organisations are engaged in the same industry and neither of them is a commercial giant, it mav be counter productive to require the newcomer to expressly disassociate himself from the business of the older established enterprise. It may suggest that there is something disreputable or undesirable about the firm from whose business the newcomer is seeking to distinguish himself. Also courts cannot control the wav in which people other than the parties will refer to the companv. so that the extent to which a disclaimer would serve any useful purpose is [ think open to serious question. I would therefore vary the orders of the trial Judge to the extent necessary to remove the disclaimer. This is one matter which remains for consideration. This case raises the question of the extent of the relationship between conduct which causes confusion in the minds of the public and conduct which is misleading or deceptive for the purposes of the Trade Practices Act 1974 ("the Act"). The two notions are loqically distinct, but in practice they are often interwoven and the boundary between the two is sometimes very fine indeed. It is now established that the question whether conduct is misleading or deceptive, within the meaning of s. 52 of the Act. is to be determined by the Court itself and that the test is objective. Evidence that members of the public have in fact been misled or deceived is admissible though not conclusive. See Parkdale Custombuilt Furniture Pty. Limited v. Puxu_ Pty. Limited (1982) 149 9. C.L.R. 191 per Gibbs C.J. at pp. 198-199: Taco Company of Australia Inc. v. Taco Bell Ptv. Limited (1982) 42 A.L.R. 177 at p. 202: Global Sportsman Limited v. Mirror Newspapers Limited 19 June 1984 unreported decision of a Full Court of this Court. It is the conduct of the corporation being sued that must be misleading or deceptive. It is irrelevant that members of the public were misled or deceived, not by any conduct of the corporation, but bv the conduct of others for whom the corporation was not responsible; Puxu (supra) per Gibbs C.J. at p. 199. A product may be identical to or so closely resemble another that members of the public are immediately misled or deceived. But the state of being misled or deceived often follows an earlier stade of confusion or uncertainty. It is in this latter area that problems of the application of s. 52 are likely to arise. Confusion is nota necessarv element in the state of being misled or deceived, but it frequently is. If the conduct of the corporation causes mere confusion or uncertainty in the minds of the public in the sense that they may be caused to wonder whether two products mav have come from the same source, the corporation does not contravene sub-s. 52(1): Puxu (supra). But in some cases the conduct of the corporation may not only cause members of the public initially to wonder whether two products may have come from the same source: they mav conclude that they do. This may constitute misleading or deceptive conduct for the purposes of s. 52. The point mav be illustrated bv a simple example. A person may shop in a supermarket and see a brand of soap which he 10. thinks has the same origin as the brand with which he is familiar. In fact the brand in the supermarket is a new brand having no connection with the old established one. If this conclusion is caused by the conduct of the maker of the brand which has onlv just come onto the market he may have contravened s. 52. I say ""mav" because all the surrounding circumstances would require examination before any firm conclusion could be reached. But the shopper may not conclude that the two brands of soap come from the same source. He may be uncertain about the matter and say to himself "This one on the shelf looks similar to the one I use. and I wonder if they are both made bv the same people. I don't really know. Oh well, I will buv it" and he takes the new brand. If it is essential that there be a representation by a corporation before its conduct mav be described as misleading or deceptive then s. 52 would probably not be contravened by the corporation in this example. It would seem to make no difference that a reasonably substantial number of people buving soap may do the same thing as the buyer in this example. It may be logical to say that the shopper was not misled or deceived by any conduct of the corporation and that he chose to make his purchase knowing that he was in doubt whether the two brands came from the same source. However. I question whether this approach accords with realitv and the legislative policy that underlies s. 52. As I understand the section it is intended to prevent the public being misled or deceived in a practical sense by the conduct of corporations ll. and of those for whose acts the corporations are responsible. The shopper in my example (there are numerous other examples illustrating the fine dividing line between confusion and deception) may have been misled or deceived by the conduct of the corporation. I. shall illustrate the point bv taking the example a little further. The corporation may deliberately produce and market the new brand of soap with a similar get-up. stvle and name to the already established soap for the purpose of increasing its market share bv confusing the public so that they are uncertain whether the two products come from the same source. The corporation would know that a not insianificant number of people would buy its product in those circumstances. It is not straining credulitv too much. or indeed at all, to conceive of such a corporation, with readv access to competent marketing advice, planning its marketing strateqv so that it could not be said that the public would think that the two products in fact came from the same source. But the corporation would know that. by stopping short of such conduct at the point where the public is merely confused or uncertain. it will nevertheless increase its sales and market share at the expense of the established product. In my view the corporation is auilty of misleadina or deceptive conduct within s. 52. It is cheating. It is the kind of conduct that I had in mind in 1980 when I said in Puxu (1980) 43 F.L.R. 405 at p. 432 that conduct may (the emphasis is mine) be misleading or deceptive if the relevant members of the public "will be caused to wonder whether it miqght not be the case that the two products came from the same source. It is enough if the ordinary person entertains a reasonable doubt 'per Kitto J. in Southern Cross Refrigerating Co. v. Toowoomba Foundry Pty. Limited (1954) 91 C.L.R. 592 at pp. 594-595 ...'°" 12. It is obvious that mere confusion or uncertainty is not the same as misleading or deceptive conduct; but, in some cases a corporation's conduct which causes confusion or uncertainty in the mind of the public may, I suagest, constitute misleading or deceptive conduct within s. 52 notwithstanding that the conduct does not constitute a misrepresentation in the sense in which that expression is understood at this staqe in the development of s. 52: Taco Company of Australia Inc. v. Taco Bell Pty. Limited (1982) 42 A.L.R. 177. Why is the section not contravened when an unscrupulous trader cleverly pitches his marketing techniques at shoppers who will be perplexed or uncertain about the identity of its and another product? In the mere seconds which are frequently involved in making decisions to buy manv products, they may simply decide in their state of confusion to buv the product which they think may be from the same source as the product with which thev are familiar; but thev are not sure. Their state of mind is one of confusion throughout, rather than reaching a final stage of conviction that the two products are the same. This situation is a commonplace. This suaqests to me that the presentlv received doctrine in this field of consumer protection may require some refinement especially on the question of confusion and the role of the intent of the alleqed offender under s. 52 in determining whether conduct is misleading or deceptive. Section 52 speaks of conduct of a corporation which is misleading or deceptive. In one sense the word "misleadina" involves the notion of deceit or craft. but qenerallv 13. today it does not. But the primary meaning of the word "deceptive" is cheating, ensnaring or deliberately misleading. It seems to me that this is, at the very least, one meaning that the word should bear in s. 52 especially as the section is designed to protect the public from improper or unfair trading practices. Also, the two words are linked by the disjunctive "or". The legislature must have intended each word to perform work independently of the other, notwithstanding some measure of possible overlap. I recognise that it is now established that the intent of the corporation is not an essential element in the notion of misleading or deceptive conduct; but in mv opinion there are cases where there will be deceptive conduct onlv where the intention of the corporation is established. The appeal should be dismissed and the cross appeal allowed. I agree with the orders proposed by the other members of the Court. a ne | certify that tnis and the Je preceding pages are a true cory cf tie Reasons for Judgment herein Zo. his F.onour Mr. Justice Lockhart. SSOC! = Dated: 74 ~ 2-S%